Back before my husband and I had kids, I did our taxes within a few days of the last tax document arriving in the mail. Our lives were simpler then.
We had an organized system for dealing with the mail; as bills came in, they were paid and filed almost immediately.
Mail didn’t linger on our kitchen counter for long. The tax documents that arrived had a designated location.
After our first child came along, I swear we started to get more mail. It now piles higher on our counters than we ever thought possible.
We can never find a checkbook or a wallet in order to pay bills, never mind finding the right envelope for the bill. Finding stamps takes forever.
We now live in fear that the tax documents will get covered with jelly or milk… or worse.
And like our counters, our tax situation also changed. There are now child tax credits and daycare reimbursements to consider. Tax season has taken on a whole new level of complexity.
Though it’s nearly impossible to sit down to file our taxes on February 1st, I generally make every attempt to file taxes as early as possible. Why? Let’s review the reasons.
1. Know the Score
When you were a kid, did you ever have the experience of doing something wrong and having your mother respond, “Just wait until your father gets home”?
The fear of not knowing what was going to happen to you kept your stomach in knots, whether you waited for 5 minutes or 5 hours. When your father finally got home, maybe he simply told you to never do it again or maybe you got grounded, but waiting for the verdict was the hardest part.
Sometimes what keeps us up at night is not knowing.
If you file your taxes early, there’s no fear of the unknown. You’ll know whether you owe Uncle Sam (and whether you can afford to pay up), or whether Uncle Sam owes you. You can rest easy – no nightmares.
2. Faster Tax Refunds
People who file their taxes earlier in the season will get their refunds quicker than people who wait. The reason is fairly simple – fewer people file earlier, so there is less demand on the IRS staff and systems to process the return.
If you wait until later in the season, you’re submitting your application during the peak of the process. Basically, you put yourself in a long line behind other procrastinators.
So if you’re getting a refund and you really need it, then hurry up and file your return.Need a reason to not procrastinate on filing your #taxes? We have 10! Click To Tweet
3. Extra time to pay the taxes you owe
Perhaps you’re pretty sure you owe Uncle Sam money this year. It’s not terribly motivating to finish your taxes early, just to have to pony up. Doing your taxes is dull enough as it is without having to pay money at the end of it.
It’s important to note that you don’t have to pay Uncle Sam until the April 15th deadline (April 18th in 2016), even if you do submit your return early.
That means you can file early and make a plan for how you will pay what you owe. That’s much better than resorting to a credit card advance, 401(k) loan, or calling home for cash.
4. Ease of obtaining help
Have you ever been to a county fair and wanted to know which food booth had the best food? There’s one easy way: look for the longest lines.
Lines form for the best of the best, and tax professionals are no different. If you can easily book an appointment with a tax professional on April 13th, then you might want to question their credentials.
On the other hand, the professionals with the best reputations might be booked up after mid-February. Filing early helps you get the advice you need.
Even if you have no plans to consult a tax professional, you might want to consider the “what if” factor. What if you do end up with a complicated question? You don’t want to find out at a point where all the good accountants are unavailable.
5. Avoiding an extension
When my daughter doesn’t want to do something, she will cry and moan (or ignore me). But that doesn’t mean she’s going to get out of it. It’s still there, and it’s often better if she will do what I asked when I asked it.
There are definitely good reasons for filing an extension. Maybe your house burned down and you lost all your tax documents – that would be a very legitimate reason for an extension!
In other cases, filing an extension is just the lazy way out. If that’s the case, all you have done is given yourself extra time to dread the process. Wouldn’t it just be better to be done with it?
6. Preventing identity theft
Last year, one of my friends waited until April 14th to file her family’s taxes. When she went to submit the return online, she got a message saying that she had already filed taxes.
Of course she hadn’t actually filed her taxes, and this was no website glitch. What actually happened was that a thief submitted a fraudulent claim in her husband’s name.
In 2014, nearly 3 million taxpayers were victims of tax fraud. You’ll never see the money from their illegitimate refund, but they will, and you might be left with a mess to clear up.
7. Get access to your money
If you’re getting a refund, the sooner you get it, the better. When your money is sitting with Uncle Sam, it isn’t working for you. The moment you put the money into your savings account, it starts growing interest.
Your refund money is definitely better off with you than with the IRS. The sooner you can get to it, the quicker you can put it to work.
8. Financial Aid
Are you planning on filling the FAFSA (Free Application for Federal Student Aid) for yourself or someone else in your household?
In order to get the maximum amount of federal aid possible, it is in your best interest to file the FAFSA as early in the process as possible, as aid is based upon the income recorded in your most recent tax return.
You’ll be asked to estimate the amounts if you haven’t filed yet, so having accurate information the first time around is recommended.
9. Buying a home
If you are buying a home in the near future, your mortgage company is going to want truck loads of documentation from you. They will want bank statements, pay stubs, W2s, and tax returns.
Especially if you have earned more money in the last year than previous years, it is in your best interest to give them this year’s return. Also note that if you get prequalified using older returns, you will likely still have to provide this year’s return prior to closing on a home.
Buying a home is stressful enough without having to burn the midnight oil to finish a return that you have put off. If you are in the market for a home, make your return a priority.Filing your #taxes early is a good move if you're in the market to buy a house Click To Tweet
10. Clear roadblocks
Were you one of those college kids who never really studied all semester long, then had to cram in the library for two weeks straight in order to pass your finals? That is a pretty stressful way to go about something that could have been paced much better. And so it is with your taxes.
If you at least set the goal of filing early, that means you will sit down and start the process. As you fill out the forms, you might realize that one of your documents never came. That gives you time to follow up with the issuer.
Or maybe you uncover a complicated tax law question – now you have time to go get help (and see point #4 – you have people actually available to help you).
Maybe you won’t actually accomplish the goal of filing early, but you also didn’t give yourself a stress-induced ulcer because you were pressing up against the deadline.
As if there weren’t enough reasons to file taxes as early as possible, if you file early, you might also see a larger return. According to IRS figures, the majority of filers choose the standard deduction on their tax form.
However, studies show that many tax payers would benefit from itemizing their deductions, which takes longer and will require more documentation.
Basically, if you file earlier, you have a better chance of having the time to ensure you get all the deductions. That might be the difference between paying Uncle Sam or getting a small refund.
If your taxes are fairly simple and you neither owe nor expect a large sum of money, then you might not feel all that rushed to get your taxes done early. That’s fine, too. However, it’s nice to check it off your list and have peace of mind knowing it’s done.
When do you plan to file your taxes? Do you typically file them early or late? Have you ever had to request an extension?